Question

The notion that borrowing to finance a new stadium in a community does not lessen the tax burden on a community; rather it simply delays the inevitable as it substitutes taxes now for taxes later when the dept is repaid is known as ___________:

a. Ramsey Rule.
b. Liquidity Trap.
c. Marginal Analysis Rule.
d. Equivalence Theorem.

Answer 1

correct option is Equivalence Theorem

Step-by-step explanation:

solution

correct option is Equivalence Theorem because equivalence theorem is known as Ricardian equivalence theorem

it states that increases in government spending that have no effect on consumer spending because when government spending increase the consumer predicts the tax cut and high spending will increase the tax rate in future to pay the debt back

so correct option is Equivalence Theorem